I don't get this. When we hear the yearly story about 4% tax hike, or whatever, does that mean the rate is increasing by 4% or something else? If it is the actual property tax rate that is being modified, then inflation is a non-issue. The entire point of tax rates, as opposed to a poll tax, is so that taxation is a constant function of some underlying metric of society's ability to pay. In municipal terms, I guess that means land values. Tax rates aren't meant to be adjusted for inflation. Tax rates implicitly take inflation into account by being a function of some kind of inflation sensitive wealth.
There's a whole page of posts following yours, but not one actually replied to your inquiry. Strange.
Anyway, to answer your question NO it does not mean that the tax rate is being increased by 4%. That isn't how property taxes work. It's clear that 95% of the population does not understand how municipal taxes work and this is contributing to the annual anger over tax increases.
- What the tax increase actually means is that the city is increasing their total take from taxes by 2.5%.
- So if the "income from taxes" section of the city's budget was $1,000,000 last year, with a 2.5% increase it will be $1,025,000 this year.
- Then the city adds together the value of all taxed properties in the city (based upon MPAC assessments), and uses this to determine the tax rate.
- So if the total value of all property in the city was $1 billion, and with a city budget from taxes of $1,025,000 as described above, the city would have to collect $0.001025 for every dollar of assessed value in the city.
- So we would have calculated the tax rate as 0.1025%.
- And therefore on a $200,000 home you would pay $205 in taxes.
So, property values have NO effect on how much tax revenue the city receives. And every new building that gets built brings NO new revenue to the city (but it does help keep your tax bill lower by raising the total assessed value of the city). And since the tax rate is determined by the budget (and not vice-versa), inflation must be accounted for.
Even though there have been tax increases every year of Miller's administration, with new construction and property value increases the tax rate in Toronto has DECREASED.
There's an additional 1.5% tax increase on top of the 2.5% as part of a plan to shift the tax burden off of businesses and on to homeowners, bringing the total to 4%. This pro-business move was implemented by Miller, not Lastman, and he has to face the flak for it every year. But if he hadn't, people would have given him flak for not helping business... damned if you do, damned if you don't. Heck, people gave him flak for not making the transfer larger!
So, account for inflation (~2%), and the pro-business tax transfer (1.5%) and we see that the ACTUAL property tax increase (that is, increase in city income from property taxes) is ~0.5%. That said, this doesn't take into account all the new service fees introduced over the past year, but we're discussing property taxes here.
Hope this helps clear things up.
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